HIGHLIGHTS-BOJ Governor Kuroda's comments at news conference

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TOKYO, July 31 (Reuters) - The Bank of Japan took measures to make its massive stimulus programme more flexible and pledged to keep interest rates low for the time being on Tuesday, reflecting its forecast that it would take time for inflation to hit its 2 percent target.

Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:

ON FORWARD GUIDANCE

“We adopted forward guidance to strengthen our commitment to achieve our 2 percent inflation target. We also took measures to make our policy framework more sustainable.

“The BOJ’s new guidance intends to allow yields to move in double the range of plus 0.1 percent and minus 0.1 percent. However, we do not intend this change to lead to a rise in interest rate levels.”

ON INFLATION, RATES

“As it is taking longer than expected for inflation to pick up, achievement of our target will be beyond our (three-year) forecast timeframe ... Under our yield curve control (YCC), real interest rates will fall even if nominal rates are steady as long as inflation expectations heighten. As such, I do not see the need for additional monetary easing now.

“Our forward guidance says we will keep rates low for an extended period of time. That is language similar to other central banks. There are various uncertainties to the outlook, so we’ll take that into account.”

ON BONDS

“We will allow long-term yields to move up and down 0.2 percentage point each from our zero percent target to improve functions in the government bond market, which had been deteriorating. This will help make our easy-policy more sustainable.”

ON ETF BUYING

“The BOJ’s ETF buying could exceed or drop below 6 trillion yen at times. By allowing this to happen, the effect of our purchases will heighten.”

ON STIMULUS

“This is the first time we will introduce forward guidance on interest rates. We’ve adopted this to ensure market trust in our policy as we will be maintaining our massive stimulus longer than initially expected. There was some speculation in the market that the BOJ will seek an early exit from stimulus, or raise rates soon. With this guidance, we can dispel such speculation.”

ON YIELDS

“I don’t see the need for the BOJ to widen the band for allowances (on yield moves) further. I don’t think yields will move that much. They haven’t been that volatile since the BOJ adopted the current policy.”

ON EASY POLICY

“There’s no change to our stance of easing policy further if necessary ... For now, we think maintaining the condition for the output gap to narrow with our easy policy would be the best way to quicken achievement of our price target.

“We took steps so we can continue our powerful monetary easing longer, because it is taking more time than expected to achieve our price target. I think that with these steps, we can continue with our massive stimulus programme.”